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Amvescap Expects Charges on Fund Trading

November 25, 2003|From Reuters

Amvescap, the parent of the AIM and Invesco mutual fund families, said Monday that it expected to face federal and state civil charges over improper mutual fund trading.

The London-based firm, which had $345 billion of assets under management as of Sept. 30, said New York Atty. Gen. Eliot Spitzer and the Securities and Exchange Commission intended to recommend civil enforcement actions against its Denver-based Invesco Funds Group based on "market timing" activities by fund investors.

Amvescap said it was cooperating fully with regulators' probes and was conducting an internal review. It said it never knowingly permitted trading after-hours of funds at stale prices, known as late trading. It also said it believed its funds' actions "have been consistent at all times with the best interests of fund shareholders."

The SEC, it said, issued a so-called Wells notice indicating the agency's intent to recommend an enforcement action.

Amvescap's announcement is the latest wrinkle in the widening probes into the $7-trillion mutual fund industry. Putnam Investments and Pilgrim Baxter & Associates are the only fund companies charged by regulators in the probe of trading abuses. Putnam settled the charges this month.

Market timing, which involves rapid trading in and out of funds, typically isn't illegal. But many fund firms discourage their customers from the practice because it can run up fees paid by other shareholders.

Amvescap said exceptions from its own trading guidelines "were made for legitimate asset allocation strategies" and that investors who abused their special trading privileges had those privileges reduced or revoked.

The firm said it steered the investments to funds where it believed their activities wouldn't hurt other shareholders.

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